Surplus or not, Dayton wants higher taxes on rich

But government reform, job creation top his 2012 priority list.

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Gov. Mark Dayton

Photo: Glen Stubbe, Star Tribune

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Projections of a surplus rather than a deficit may have caught Gov. Mark Dayton by surprise, but that doesn't mean he's giving up on his signature issue of taxing the rich.

"I'm not dropping that," Dayton said of his proposal to raise taxes on millionaires. "We will come in with it as the lead in to the 2013 session, regardless of the outcome of the election."

In a wide-ranging interview this week with the Star Tribune, Dayton said he remains committed to a long-range plan to raise taxes on the wealthy despite Republican opposition. A Senate leader last week pronounced Dayton's tax-the-rich agenda dead after hearing of the state's $876 million surplus.

For 2012, Dayton will turn to plans for robust job growth and government reform that may be less sexy, but more durable and provide more common ground with the Republicans that rule the House and Senate.

"I think it's great," said Senate Majority Leader Amy Koch, R-Buffalo, of Dayton's 2012 plans. Koch, who spent much of last session at loggerheads with the DFL governor, said his new plan "aligns perfectly with our agenda, which is jobs and reform."

The alignment may fall short of perfect.

Dayton wants to pass a Vikings stadium bill and a bonding bill in the opening weeks of the legislative session, which starts on Jan. 24.

Both, he said, are key ingredients in jump-starting jobs and providing lasting infrastructure improvements.

Republican House and Senate leaders are barely convinced that the state should subsidize a stadium at all and their bonding ceilings tend to be far lower than those of DFLers.

DFL Senate Leader Tom Bakk, of Cook, said the $775 million figure outlined by Dayton is a starting point. For Koch, it already sounds too rich.

That kind of opening divide tempers Dayton's optimism about passing a state borrowing bill in the session's first month.

"It probably won't be," he said.

'Reforming' government

Agreement on the size of government has proven elusive, but Dayton could find a lasting accord with Republicans on streamlining government -- even at the risk of dismaying some DFL stalwarts.

Republican lawmakers, who spent much time after the summer's government shutdown noodling reform ideas, say they welcome a change from the usual tax hikes-vs.-spending cuts fight.

That fight is "a distraction from the focus that we really need to have, which is to make sure the money we are spending is accomplishing things that we want done," said Assistant Senate Majority Leader David Hann, R-Eden Prairie.

Despite ideological clashes earlier this year that brought government to a standstill over the summer, Dayton said he is eager to work with Republicans on making government run better.

"If they have other ideas of their own, we will welcome those," Dayton said.

Acrid aftertaste remains

Dayton's bitterness over his brutal first legislative session has not completely evaporated.

He attributes last session's gridlock and the 21-day government shutdown that followed to "fiscal irresponsibility on the part of the Republicans."

Dayton said he learned in the 2011 session that for some Republicans, ideology "trumps any personal relationship, so I don't put as much stock in that effort as I did a year ago."

Even so, he said, there is room for cooperation.

"I'll get along with those who are going to prove themselves willing to get along with me," Dayton said, praising Koch, House Speaker Kurt Zellers, R-Maple Grove, and stadium experts Sen. Julie Rosen and Rep. Morrie Lanning.

For their part, Republicans say the state is seeing the consequences of that ideology -- a forecasted state surplus for the first time since 2007.

Koch said it time to let the past be past and quit the name calling.

Still calling to 'tax the rich'

While he will not push for higher taxes next year, the governor wants to make one thing clear: He still intends to "tax the rich."

Addressing a group of county officials earlier this week, Dayton said: "I don't believe that we will achieve real budget stability -- and certainly not budget sufficiency -- until we replace one-time gimmicks like school shifts and tobacco borrowing with a more progressive state income tax."

Last week's surplus projection may have made that task more difficult.

"It's hard but it's not impossible," said Ben Goldfarb, executive director of Wellstone Action, which trains and supports Democrats. Goldfarb said Dayton can and should, keep making the pro-tax argument as a "crystal clear statement of values."

It's an argument that has worked for Dayton before. After campaigning and winning on a platform that openly promoted higher taxes for the wealthy, Dayton continued to pitch his solution throughout a deficit year and the three-week summer shutdown. His poll numbers remained high.

Republicans remain staunchly opposed to higher taxes, saying it risks the state's fragile recovery and could chase away the very job creators the state needs to attract.

For now, Dayton said he is taking the issue to the people -- not their lawmakers.

"It's just the reality of the session," he said. "We will accomplish what we can. And then we will see what the people of Minnesota will decide."

Rachel E. Stassen-Berger Twitter: @rachelsb

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